Federal Circuit Review | July 2015
Nunc Pro Tunc Assignments Insufficient To Confer Retroactive Standing
In ALPS SOUTH, LLC v. OHIO WILLOW WOOD CO., Appeal Nos. 2013-1452, 2013-1488, 2014-1147, and 2014-1426, the Federal Circuit reversed the denial of a motion to dismiss for lack of standing because Alps’s license, at the time it filed the complaint, included a field of use restriction and Alps could not cure this standing defect by executing a retroactive, nunc pro tunc amended license agreement.
Alps entered an agreement to license the patent-in-suit and the agreement restricted Alps’s rights in the patent to the field of prosthetic products. Alps then sued Ohio Willow Wood (OWW) for patent infringement, and did not name the patent owner as a co-plaintiff. OWW filed an unsuccessful motion to dismiss for lack of standing. While the motion was pending, Alps executed an amended license agreement eliminating the field of use restrictions and including an effective date prior to the lawsuit. The case proceeded to trial, and the jury found the patent was valid and OWW had willfully infringed. OWW appealed the denial of its motion to dismiss for lack of standing, among other things.
The Federal Circuit reversed the denial of OWW’s motion to dismiss, vacated the judgment against OWW, and remanded with instructions to dismiss the case. The Federal Circuit concluded that Alps’s license at the time the complaint was filed included a field of use restriction, and such a restriction on rights resulted in a lack of standing to pursue litigation without naming the patent owner as co-plaintiff. Regarding Alp’s retroactive amended license, the Federal Circuit looked to its previous decisions confirming that nunc pro tunc assignments are insufficient to confer retroactive standing. The Federal Circuit concluded Alps was required to have all substantial rights to the patent on the day it filed the complaint and that requirement cannot be met retroactively.
Price Optimization Claims Held Ineligible For Patent Protection At Pleadings Stage
In OIP TECHNOLOGIES, INC. v. AMAZON.COM, INC., Appeal No. 2012-1696, the Federal Circuit held that claims directed to the abstract idea of offer-based price optimization and merely automating traditional methods do not recite patentable subject matter under 35 U.S.C. § 101.
OIP Technologies sued Amazon, alleging infringement of a patent relating to a method of price optimization in an e-commerce environment. Amazon filed a motion to dismiss OIP’s complaint, arguing that the asserted patent was drawn to patent-ineligible subject matter under § 101. The district court granted Amazon’s motion, finding that the asserted claims merely used a general-purpose computer to implement the abstract idea of offer-based price optimization.
The Federal Circuit affirmed. Applying the Supreme Court’s two-part test described in Alice Corp. v. CLS Bank International, 134 S. Ct. 2347, 2355 (2014), the Federal Circuit first determined that the asserted claims are directed to the abstract idea of offer-based price optimization. Claim 1 recites a “method of pricing a product for sale,” and the specification describes the invention as an “automatic pricing method and apparatus for use in electronic commerce.” The Federal Circuit then considered the elements of each claim, both individually and in combination, and determined that the elements “merely recite well-understood, routine, conventional activities.” The court found that, at best, “the claims describe automation of the fundamental economic concept of offer-based price optimization through the use of generic-computer functions” such as sending electronic messages, storing results, and using a computerized system to determine estimated outcomes. Thus, the claims failed to transform the abstract idea into a patent-eligible application.
Injunction And Sanctions Set Aside After PTO Cancels Underlying Claim In Reexamination
In EPLUS, INC. v. LAWSON SOFTWARE, INC., Appeal Nos. 2013-1506, 2013-1587, the Federal Circuit set aside an injunction and associated civil contempt sanctions after the USPTO, during reexamination proceedings, canceled the underlying patent claim forming the basis for the injunction.
A jury found Lawson to be infringing a number of claims asserted by ePlus. Based on the jury verdict, the district court entered a permanent injunction against Lawson. In a first appeal, 700 F.3d 509 (Fed. Cir. 2012), the Federal Circuit affirmed the infringement verdict as to only one of the asserted claims. On remand, the district court modified the injunction based on the Federal Circuit’s decision and found Lawson in civil contempt for violating the injunction, despite Lawson’s arguments regarding equitable considerations and its attempts to redesign its products. Lawson appealed. While the appeal from the district court was pending, the USPTO found the remaining claim invalid after completing reexamination. In an appeal from the USPTO, 760 F.3d 1350 (Fed. Cir. 2014), the Federal Circuit affirmed the USPTO’s invalidity determination.
In the current appeal, the Federal Circuit considered whether an injunction can continue after the USPTO has canceled the only claim on which the injunction is based. In addition, the panel addressed whether civil contempt remedies based on the violation of an injunction are appropriate when the injunction has been overturned on direct appeal. The Federal Circuit held the injunction must be set aside because the legal basis for the injunction had ceased to exist. The Federal Circuit also held the civil contempt sanctions should be set aside. The Federal Circuit pointed out that, unlike criminal contempt sanctions, civil contempt sanctions award a compensatory fine to the other party. The Federal Circuit determined this compensatory fine depends on the outcome of the controversy, and must be set aside when the basis for the sanctions is reversed. The Federal Circuit also held that, because it had modified the district court’s infringement ruling in its first panel decision and did not specifically evaluate the district court’s injunction, the injunction was not final after the first appeal and could be set aside retrospectively.
In a separate order, the Federal Circuit denied ePlus’s petition for rehearing en banc. Chief Judge Prost and Judge Dyk concurred in that denial arguing that, because an appeal to the Federal Circuit was pending regarding the scope of the injunction at the time the USPTO invalidated the underlying claim, the injunction was not final and both the injunction and civil contempt order must be vacated.
Judges Newman, Moore, and O’Malley authored separate dissents arguing that the civil contempt sanctions should not have been overturned because the injunction was final with respect to the remaining claim at the time the civil contempt order was issued.
Claims Held Indefinite Despite Subsidiary Facts Supporting Definiteness Lacking Clear Error
In TEVA PHARMACEUTICALS USA, INC. v. SANDOZ, INC., Appeal Nos. 2012-1567, 2012-1568, 2012-1569, 2012-1570, on remand from the Supreme Court, the Federal Circuit again held the challenged claims to be indefinite because the claims, specification, and prosecution history do not convey with reasonable certainty the measure of molecular weight to be used, even after a finding that the district court’s factual determinations were not clearly erroneous.
Sandoz submitted ANDAs for generic versions of one of Teva’s branded drugs. Teva sued for patent infringement. The relevant claim recited a method of manufacturing a compound having a “molecular weight” within a specified range. There are three different measures of molecular weight: peak average, number average, and weight average, each having a different value. The district court held that the claim was sufficiently definite, and the Federal Circuit reversed. The Supreme Court vacated the Federal Circuit decision, holding that, while it is proper to treat the ultimate question of the proper construction as a question of law, subsidiary factual findings should be reviewed for clear error. The Supreme Court remanded to the Federal Circuit.
On remand, the Federal Circuit concluded that the claims, specification, and prosecution history do not convey with reasonable certainty the measure of molecular weight to be used. The Federal Circuit, after noting that the district court’s factual determinations were not clearly erroneous, concluded that the factual determinations do not resolve the ambiguity in the claims about the intended molecular weight measure. The Federal Circuit noted that, in one continuation patent, the applicant overcame an indefiniteness rejection by indicating that a weight average molecular weight should be used, and in another continuation patent, the applicant overcame a similar rejection by stating that a peak average molecular weight was to be used. Based on the lack of guidance as to “molecular weight” in the claims or the specification and based on the inconsistency in the prosecution history of the continuation patents, the Federal Circuit concluded that the claim is invalid for indefiniteness.
In dissent, Judge Mayer argued that a single statement in the prosecution history of a continuation application should not be dispositive on the question of whether the asserted patent is sufficiently definite, especially when the trial court has determined a person of ordinary skill in the art would not have relied on the statement based on its scientific inaccuracy.
Federal Circuit Nixes Strong Presumption Against Invoking Means-Plus-Function Statute
In WILLIAMSON v. CITRIX ONLINE, LLC, Appeal No. 2013-1130, the en banc Federal Circuit reversed the precedent creating a “strong” presumption that 35 U.S.C. § 112, sixth paragraph, does not apply when a claim does not use the term “means for.” The standard is now “whether the words of the claim are understood by person of ordinary skill in the art to have a sufficiently definite meaning as the name for structure.” If the words of the claim do not meet that standard, the statute applies.
In an earlier panel opinion, 770 F.3d 1371 (Fed. Cir. 2014), the majority held use of the word “module” does not invoke the means-plus-function language of § 112, sixth paragraph, and the claim was not indefinite. In reaching that conclusion, the majority held that, because the claim did not use the word “means,” there was a “strong presumption” the statute does not apply. Citrix sought en banc review.
The en banc Federal Circuit considered the strong presumption and eliminated it. “The standard is whether the words of the claim are understood by persons of ordinary skill in the art to have a sufficiently definite meaning as the name for structure. When a claim term lacks the word ‘means,’ the presumption can be overcome and [the statute] will apply if the challenger demonstrates that the claim term fails to ‘recite sufficiently definite structure’ or else recites ‘function without reciting sufficient structure for performing that function.’ The converse presumption remains unaffected: ‘use of the word ‘means’ creates a presumption [the statute] applies.’”
The Federal Circuit concluded the term in question (module) was “a well-known nonce word that can operate as a substitute for ‘means’” in the context of § 112, sixth paragraph, and the claim did not recite sufficiently definite structure. The Federal Circuit then moved to the second step of means-plus-function construction to determine if the specification disclosed corresponding structure. Because the specification did not disclose adequate corresponding structure, the claim was indefinite.
Claims Beginning And Ending With Pre-Existing Natural Phenomena Not Patent Eligible
In ARIOSA DIAGNOSTICS, INC. v. SEQUENOM, INC., Appeal No. 2014-1139, 2014-1144, the Federal Circuit held that claims are directed to patent-ineligible subject matter under 35 U.S.C. § 101 where the claimed method begins and ends with pre-existing natural phenomena and uses only well-understood, routine, and conventional techniques as intermediate elements.
Sequenom accused Ariosa’s noninvasive, prenatal testing of patent infringement. The disputed patent claims methods of prenatal diagnostics requiring the detection and analysis of cell-free, fetal DNA (cffDNA). On cross-motions for summary judgment, the district court determined Sequenom’s claims were not drawn to patent-eligible subject matter.
The Federal Circuit agreed “the method reflects a significant human contribution in that [the inventors] combined and utilized man-made tools of biotechnology in a new way that revolutionized prenatal care” but nevertheless affirmed the district court’s decision invalidating the claims. Following the framework of Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289 (2012), the Federal Circuit first observed the patented method begins with the recognition cffDNA exists in maternal blood and ends with detecting paternally inherited cffDNA. Both of these are pre-existing natural phenomena, which the inventors did not create or alter. Because the “method therefore begins and ends with a natural phenomenon, . . . the claims are directed to matter that is naturally occurring.”
The Federal Circuit next examined “whether the claim contains an inventive concept sufficient to transform the claimed naturally occurring phenomenon into a patent-eligible application.” The Federal Circuit concluded the claim effectively stated the natural phenomenon while adding the words “apply it” because the claim elements used well-understood, routine, and conventional techniques when detecting paternally inherited cffDNA from maternal blood. The Federal Circuit next addressed Sequenom’s preemption argument. The Federal Circuit observed that, “[w]hile preemption may signal patent ineligible subject matter, the absence of complete preemption does not demonstrate patent eligibility.” The Federal Circuit concluded that, “[w]here a patent’s claims are deemed only to disclose patent ineligible subject matter under the Mayo framework, . . . preemption concerns are fully addressed and made moot.”
Here, the “only subject matter new and useful as of the date of the application was the discovery of the presence of cffDNA in maternal plasma or serum.” The Federal Circuit did “not disagree that detecting cffDNA in maternal plasma . . . is a positive and valuable contribution to science.” Nevertheless, this valuable contribution fell short of statutory patentable subject matter.
